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Business and Policy Areas
Business and Policy Areas

Reengineering Your 403(b) Plan

May 13, 2015

By Amy Haug

As of December 2014, our transition to a new retirement program at DePauw University was complete, and we were able to ring in the new year with a 94 percent reenrollment of eligible employees into the new plan—far surpassing our goal of 50 percent. In addition, the rollout of our new plan picked up another 7 percent first-time enrollees into DePauw's retirement benefit.

Today, the retirement program for DePauw's more than 800 employees totals approximately $144 million in assets. Employee contributions of 5 percent are matched by an 8 percent contribution from the university. Our employees have access to equity and fixed-income options, annuities, and a guaranteed option. The menu of approximately 25 investment vehicles includes a family of target-date and life-cycle funds, along with a brokerage service for employees who would like to invest directly in the funds of their choosing.

Our previous retirement program was cumbersome and inefficient. Prior to consolidation of vendors, we had four plan administrators, which meant four different 403(b) information packets distributed to each employee. Combined, these plans offered more than 300 investment options. Frustration from employees about a lack of investment advice and guidance to help them compare products and understand their options helped university leadership identify that a change was in order.

Transition Timeline

Vendor consolidation was among the recommendations made by DePauw's employee 403(b) oversight committee, comprised of faculty, staff, and administration. Leadership agreed. The RFP process began in spring 2013, and by the summer we selected TIAA-CREF as our sole recordkeeper. In a similar RFP process, Cammack Retirement Group was identified as our investment adviser.

Our transition process lasted through the summer of 2014 and included a full review of investment offerings and technical and logistical process changes with our payroll system. In addition to streamlining investment choices for employees—from the more than 300 options of our prior program to a much more manageable selection of about 25—the switch to a single plan administrator provided the opportunity to transition to a new technology platform. This has subsequently allowed us to clean up the inefficiencies of our previous payroll system, including the elimination of excessive payroll codes associated with the retirement program.

Through the summer of 2014, we also developed plan information and education materials in anticipation of our reenrollment effort, which launched in October 2014. By December 2014, our transition to the new plan was complete, along with formalized investment policies and procedures that include a quarterly review of investment fund performance. As of this past January, we turned attention to enhancing our employee financial education and programming and promoting the on-site personal financial management advising appointments offered by TIAA-CREF.

Communication Rollout

The centerpiece of our communication plan was the transition guide, which included an overview of the new investment lineup. The guide was mailed to all eligible participants, including active employees and retirees, in August 2014. We followed this up with an e-mail to all faculty and staff, again attaching the transition guide and investment lineup overview. During the month of August, human resources conducted department and division meetings to answer questions about the reenrollment process and encourage individuals to schedule on-site appointments with TIAA-CREF enrollment specialists. Employees could also enroll online or call an associate and complete reenrollment over the phone.

We remained flexible and responsive to the communication plan rollout. Early on we decided to move our reenrollment help desk from our administration building to our student union building, resulting in a significant increase in individual consulting sessions scheduled. We tracked progress weekly, adjusting outreach efforts based on which individuals hadn't yet reenrolled. We visited department meetings, handing out appointment cards to meet with an enrollment specialist. A side benefit of this concerted communication effort is that in addition to successfully reenrolling nearly all employee participants of our former program, more than 12 percent of participants started a new salary deferral.

Lessons Learned

While some employees voiced concerns about the transition of the benefit program, more often employees were genuinely interested in revisiting their retirement planning goals. Many employees acknowledged that they hadn't looked closely at statements or revisited their investment mix for quite some time. The transition provided opportunities for many to do the kind of financial checkup they had been putting off for whatever reason. How much were they investing? Where? What might the new plan options allow for optimizing long-term savings? How much are they on track to have available to spend in retirement? The positive feedback we received included appreciation that the new plan is so much more accessible, with streamlined options and flexibility to call, go online, or meet with a consultant to make changes to their plan.

While in many respects this process went more smoothly than anticipated, I can share some advice based on our experience at DePauw.

  1. Identify key constituency groups among your employees and communicate with and involve them in the process early on and throughout the transition. Even if these folks don't play a direct role in program decision making, provide them with updates as decisions are made. In our case, we met with our Economics Department faculty to talk through investment options because we believed they were likely to be among the most engaged subsets of our employee population—and therefore essential to have on board. Even before we moved forward with the transition, we talked through our proposed process with them, and they were able to pose questions about the rationale for various investment options. This helped us improve and clarify communication to the broader employee population.
  2. Select good partners. This may seem obvious, but it can't be overstated. In addition to our plan administrator and investment adviser, we have a great audit partner and benefits legal counsel. As part of our retirement program transition, we did due diligence in talking with numerous colleagues from other institutions to get their reviews of each of the partners we selected.
  3. Customize your communication materials. All plan administrators have their own template, but think about how you can fine-tune materials so they look and sound like they were produced by your institution. Since our primary piece of employee communication was the transition guide, we took extra pains to make sure it addressed information of greatest interest and relevance to our employees.

Amy Haug is human resources director, DePauw University, Greencastle, Indiana. E-mail: